State Investigates Broker's Hold On Broward Funds

January 3, 2001|BY MEGAN O'MATZ Staff Writer

The state Department of Insurance is examining whether a Broward County insurance broker, McKinley Financial Services, acted improperly in temporarily holding county funds and collecting interest on the money, instead of paying the county's premium on time.

"We are gathering information and are looking into the matter," Nina Bottcher, spokeswoman for the Insurance Department, said Tuesday.

At issue is whether McKinley broke any laws in February by detaining more than $600,000 in county tax dollars and earning $12,000 in interest rather than forwarding the money promptly to FM Global, an Atlanta company that provides property and casualty insurance for county-owned buildings.

In doing so, McKinley deprived the taxpayers of the opportunity to earn interest on the funds.

Under state law, it is a first-degree felony for an insurance agent to "temporarily or permanently divert" $100,000 or more in funds that they are not "lawfully entitled" to possess.

Executives at McKinley, a Fort Lauderdale minority-owned insurance company that employs city Commissioner Carlton Moore, did not return calls for comment.

In a Dec. 14 meeting with a county committee charged with selecting an insurance broker, McKinley's owner, James McKinley, said his company had a deal with FM Global, the insurer, to stagger the county's payments. Moore was present at the meeting.

Representatives of the Atlanta-based FM Global denied that they sanctioned the so-called "premium holdback."

"We send out an annual installment bill and on the bills it says, `payable upon receipt,'" Elton Johnson, FM's senior account manager, told the committee, according to an official transcript of the meeting.

FM Global notified the county's risk management division in June that it had not received the full premium.

"We didn't call the county about it until we were to the point as a company where we were trying to make the decision to cancel the insurance or not for nonpayment of premium, and we decided not to," Johnson told the committee.

He said it was not the first time McKinley had delayed payment. In 1999, he reported, McKinley withheld 10 percent.

"In the year 2000, the withholding jumped to 20 percent, and that's when we decided to get serious about that," Johnson said.

Under a 1997 contract that expires next month, the county paid McKinley $95,000 a year.

County Auditor Norman Thabit said nothing in the contract addressed whether McKinley could retain the funds and earn interest on them. Thabit said the county's new agreement with McKinley, which will be voted on by county commissioners Jan. 9, calls for the county to pay the insurer directly, bypassing McKinley.

"We took steps to deal with this," Thabit said. "I feel it's well under control."

Megan O'Matz can be reached at momatz@sun-sentinel.com or 954-356-4518.